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HCMWorks Insights

Why Supplier Relationship Management Should Be Your First Focus

Posted by Julia Fournier on 21 Sep 2015

Put simply, supplier relationship management (SRM) is about integrating the right technology, processes, resources, and tools needed to align your organization with your suppliers to create stronger and more loyal relationships. It allows for greater focus on what is critically important to your business.

But, for some reason, it’s not as well understood or formally adopted, as it should be. With a greater focus on customer relationship management, higher sales, and greater profits, many organizations forget how important their relationships with their suppliers truly are. They do not see suppliers as being strategically critical to success, and unfortunately, neglect supplier relationship management at their own peril.

The fact is supplier relationship management is one area of business that needs to become a top priority. It can have significant positive effects. Adopting a strategic approach with both key suppliers and smaller vendors can lead to enormous, long-term benefits. Here are just a few of them.

Reduce Spend

If you looked at the numbers, you’d probably realize that your organization actually spends more with suppliers than on other internal costs. When your spend in any category is that significant, you need to be working to reduce it. Supplier relationship management can help. Having great relationships with your suppliers can save your company money. You might be able to take advantage of attractive deals, incentives, and discounts offered by happy and loyal vendors; great pricing can give you an edge over your competition. Plus, the more well run your relationships are, the less likely that you’ll have to spend money on the unexpected costs that come with delays and mistakes in production.

Increased Efficiencies

Effective supplier relationship management can increase efficiencies, which is critical in today’s fast-paced and competitive marketplace. With automation, you can eliminate much of the unproductive administrative effort needed to manage suppliers, reduce the risk of errors, increase communication, increase control, allow for categorization, ensure tasks are performed in a consistent manner, resolve issues promptly, and increase visibility that will facilitate sourcing and other aspects of the process. The higher your organizational efficiency, the better you can run your business—it’s that simple.

Loyalty

It isn’t easy to find good suppliers. Once you are doing business with them, the last thing you want is to lose them and have to source new suppliers who might not be as pleasant to work with, as cost-effective, or as efficient. By properly managing and strengthening your relationships with the suppliers that you want to keep on a long-term basis, you can keep them happy and on board. Your suppliers play a major role in your business, whether you realize it or not, and it’s crucial that you do what you can to keep the good ones around. Think of them as more than just companies that supply goods or services—think of them as allies that can influence your success.

Improved Value

The ultimate goal of procurement is to receive the best value for your dollar from suppliers. Through structured, strong supplier relationship management, that’s exactly what you will get. The intelligence you will receive through automation in particular will allow you to gain insights that will allow you to make the best decisions that will provide the greatest value. You will get greater visibility into supplier performance, including risks, behavioral patterns, and service levels, so you can see potential issues before they arise in order to promptly rectify them. You’ll also be able to see new mutually beneficial opportunities as they show themselves.

Additionally, having good relationships with your suppliers means that they might just prioritize you. They’ll go to bat for you, make exceptions for you, and work their hardest to meet your quote, deliver your goods in a timely manner, provide the top quality that you need, and provide the support that you require.

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Tags: Vendor Management

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